Kenya's property market hit milestones despite economic downturn

NAIROBI, KENYA:Real estate has no doubt proved to be among the most resilient sectors of the economy. It achieved notable milestones amid lows of the turbulent of the time.

This in a year, where, almost all sectors of the economy were weakened by the worries of electioneering period.

However, it did not get away unscathed. According to the Economic Survey Report which was released by Kenya National Bureau of Statistics in April 2017; the real estate sector had contributing 8.8 per cent of Kenya’s GDP in the year 2016. The figures are not in for 2017, but it is highly likely that the sector took a hit.

From the word go, there was a cautious approach to this year, then the bad news started. In the run-up to the election, Central Bank of Kenya Governor Patric Njoroge released a report that indicated that local construction companies were among the top loan defaulters in banks. Some of these companies are in the housing sector which were said to be struggling to pay their debts.

According to Njoroge, real estate, by then, owed commercial banks about Sh3.9 billion in bad debts.

“A lot of these relate to delayed payment by the government, both the national and county, and we expect the numbers to look better as they get paid,” Dr. Njoroge said.

However, in spite of all these challenges, the year has enjoyed the highs of the time. And as we near the end of the year we look at the good.

Investments in logistics and warehousing

In August this year after the August 8 election, financial services firm Britam Asset Managers said Nairobi was likely to welcome multi-billion shilling investments as international logistic hubs operators launch operations in the East African region, where Kenya is the market leader.

The report indicated that Grade-A warehouses were largely being sought after by property investors who are setting bases in Kenya.

This year the 5,000-acre Tatu City property, 400-acre Tilisi Logistics Park and the 200-acre Infinity Industrial Park remaine the largest beneficiaries of the emerging trend where logistics investor companies were taking up Grade-A space or Just-In-Time (JIT) facilities located in less congested and accessible areas away from Nairobi’s Industrial Area.

Knight Frank also noted that in the year, the newly created by-passes around Nairobi had enabled a freeing up of transport routes and the intersections had turned the areas into hotspots for logistics parks where Tilisi, Tatu Industrial & Logistics Park, Northlands Commercial Park, Infinity Industrial Park and Nairobi Gateway Logistics Park had pitched tent.

“Occupiers are willing to pay about Sh600 per square metre per month in Nairobi for the same quality of space they would find in South Africa or Eastern Europe,” Ben Woodhams, Managing Director Knight Frank Kenya said of the trend, adding: “However, local developers are struggling to provide such quality for purpose-built properties at less than Sh900 per square metre per month due to existing building practices and lack of economies of scale.”
An architectural design of UAP Towers office development PHOTO:COURTESY

New land regulations

In November this year, Lands Cabinet Secretary Jacob Kaimenyi gazetted the new land administration regulations as envisaged in the Constitution passed in 2010.

The notice on the Land Registration (Registration Units) Order 2017 and the Legal Land Registration (General Regulations) 2017, among others, was in the special supplement of the official gazette that came out on November 24. The rules are expected to be tabled in Parliament for approval and enactment.

It is this approval that will help comply with a 2016 court order that directed Prof Kaimenyi to comply with the directive, that, Ardhi House enacts the new regulations, or else all land transactions conducted in the absence of the rules since the NLC assumed office in 2013 would become null and void.

Digitising of construction industry

The National Construction Authority, which is the overseer in the industry, introduced new digital milestones that allowed the registration of construction projects to go online.

“Online project registration and the use of the GIS for on-site inspections have boosted our projects supervision and registration of project in the year 2017 compared to the previous years,” Manduku says.

BMI Research, A Fitch Group Company, in October projected the industry is set to close the year with a growth of 8.7 per cent. A growth which will remain steady up to 2026 with an annual growth of 6.2 percent.

Landmark structures

In February, the retail sector welcomed the Two Rivers Mall, the largest shopping complex in Kenya.

Two Rivers, which is owned by NSE-listed investment company Centum, has already attracted more than 150 international and local brands into its space.

Also, in the commercial and residential and office markets, landmark buildings came up or were launched. Among these is the Sh20 billion Pinnacle Towers. This iconic tower in the capital will include a 45-floor Hilton hotel. At 900 feet, the building will have the highest viewing deck in Africa. Other remarkable buildings include the UAP Park Towers which is 143 metres tall with 33 levels and the 38-storey Britam Towers in Upper Hill.

Then, there is FCB Tower in Kilimani, KCB Plaza and the 45-storey Jabavu Towers in Upper Hill.